Avoid Crypto Honeypots: A Guide to Staying Safe

The decentralized finance (DeFi) world moves fast, and so do the scams. Honeypot scams are particularly dangerous, silently trapping investors' funds. This guide, brought to you by Codeum, explains how these scams work and how to avoid them.

Understanding Honeypot Scams

A honeypot is a malicious smart contract designed to look legitimate. It allows you to buy tokens, but prevents you from selling, permanently locking your funds. Everything may appear normal – liquidity, price movement, transaction history – but it's a carefully constructed trap.

How Honeypots Work: A 3-Stage Process

Deployment: Attackers deploy a malicious smart contract, often on Ethereum or BNB Smart Chain, designed to mimic a legitimate token.
Exploitation: Investors buy the token, unknowingly triggering hidden restrictions that prevent selling. Transactions silently fail, leaving funds trapped.
Withdrawal: The scammer, the only one able to sell, drains the liquidity pool, leaving investors with worthless tokens.

Types of Honeypot Scams

Smart Contract Honeypots: These directly block selling through contract code. Tools like Honeypot.is can help detect these.
High Sell Tax Honeypots: Selling is possible, but with extremely high fees (often 100%), rendering the investment worthless.
Fake/Pulled Liquidity Honeypots: Fake or suddenly removed liquidity prevents token conversion to anything valuable.
Hardware Wallet Honeypots: Compromised cold wallets sold through untrusted channels allow scammers remote access to funds.
Honeypot-as-a-Service (HaaS): Pre-built kits make it easier than ever for scammers to launch these attacks.

Honeypots vs. Rug Pulls

Both are malicious, but differ significantly. A honeypot is like a store with a locked exit; a rug pull is like a store that disappears overnight. Honeypots are designed to trap buyers, rug pulls are about quickly draining liquidity.

Modern Honeypot Tactics

Recent scams involved fake cold wallets sold online, pre-loaded with compromised private keys. Always buy hardware wallets from official sources only.

Protecting Yourself from Honeypot Scams

Test Small Sells: Buy a small amount and immediately attempt to sell. Blocked sales are a major red flag.
Use Smart Contract Scanners: Tools like Honeypot.is, Token Sniffer, or DexTools can identify malicious code.
Verify Sell Activity: Check for legitimate sell transactions from various wallets, not just the initial buys.
Beware of 100% Sell Taxes: These are a common way to prevent exits.
Don't Rely on "Verified" Contracts: Verification only confirms the code's visibility, not its safety.
Be Wary of Sudden Hype: Unrealistic promises and rapid hype often mask scams.

Codeum: Your Partner in Blockchain Security

Codeum provides comprehensive blockchain security services, including smart contract audits, KYC verification, custom smart contract and DApp development, tokenomics and security consultation, and partnerships with launchpads and crypto agencies. We help protect your projects and investments from evolving threats like honeypot scams.

Disclaimer: This article does not provide financial advice. All investments and trading involve risk. Conduct thorough research before making any decisions.

Avoid Crypto Honeypots: A Guide to Staying Safe